It’s harder than you think (thoughts on Slack)

It’s harder than you think – Public Enemy

Slack just did a massive $100m financing round. Its parent company, Tiny Speck, started in 2009 as a game company. They did 3 rounds of funding for about $15 mil before ditching games altogether and entering the corporate IM space.

Monetizing games is a fight against entropy. They peak in two weeks and then you have to continue pushing out content, promotions, acquire users (as long as LTV > CAC and in a world where LTV goes always down and CAC goes up). If you look at the user activity curve of all successful games it look always the same. There are very few exception and these tend to be very valuable (World of Warcraft, Clash of Clans).

Successful tech companies OTOH have a curve that compounds over time. This is because providing entertainment is a fickle proposition and is due to end at some point in the near future, while solving problems or enabling solution is potentially boundless.

TL;DR raising financing for games is easier harder than tech because the adoption is very different and over time one returns more money than the other. Also you price game companies using present revenues while tech companies tend to be valued on growth and future revenues (as revenues can be built later – see ‘Business models are a commodity‘).

PS. I really <3 Slack. If Yammer was still around as a private company they would have been clobbered. Now that they are Microsoft they are going to be completely wiped out.